WORKERS’ COMPENSATION: Things to Consider Beyond Base Rates – Matthew Davis MBA, AAI

Written by on 8/23/2011 9:17 PM . It has 0 Comments.

Depending on the industry, Workers’ Compensation costs are significant expense for many business owners; but unlike other large expenses, many business owners do not make fully informed decision when purchasing their policies.

Through my experience working with clients at I have noticed that COST continues to be the primary driver behind an employer’s decision when it comes to placing their workers’ compensation insurance. The concern that I have is that an alarming number of business owners are being misled when it comes to purchasing the coverage by a perpetual “shell-game” when it comes to premium rates and how brokers disclose them.


The issue as I see it is two-fold.

(1) Although all brokers/agents must be licensed by the state where they transact business, the licensing requirements do not adequately screen for specialized knowledge and expertise that is necessary when selling workers’ compensation insurance – one must simply attend a 52 hour class and pass 1 multiple choice exam. 

(2) insurance agents are incentivized by commissions which leads to a number of other issues, the most prevalent is that less scrupulous agents/brokers will obtain as many quotes as they can and then only present the ones they chose to the client (many times the presented quotes do NOT offer the best terms, but rather offer the highest compensation to the broker).

In order to assist our clients, and the Workers’ Compensation insurance buying public as a whole, GDI Insurance has created a bullet point list of items that employers should ask their brokers regarding their workers’ compensation rates before they sign for another renewal term. The list contains key topics and questions that are intended to both obtain the necessary information for employers to make informed decisions and to require the broker to divulge the information they should be forthcoming with in the first place.


  1. What is the “Net Rate” that is being charged by class code?  (Comparing Net Rates allows the buyer to directly compare all quotes to each other without having to worry about fluctuations in payroll from broker to broker and quote to quote.)
  2. What is my Experience Modification Factor (X-Mod) for my upcoming renewal?  (The X-Mod should be correct, but we have found that less scrupulous brokers/agents have begun falsifying X-Mod’s on quotes in order to provide lower premiums – The issue is that when the X-Mod gets corrected, and it usually does, the employer and not the broker will be left to make up the difference.)
  3. What is my X-Mod projected to be next year?  (By knowing what your X-Mod is and what it will be in the future, you will be able to make more informed decisions regarding your insurance program. This also allows the buyer to evaluate the broker’s competence and expertise.)
  4. Does this carrier pay dividends?  (This should be a simple “Yes” or “No” answer and will lead directly to the next question.)
  5. What is the history of dividend payments from this carrier?  (Some carriers offer dividend programs but without a proven track record of performance, the program may perform like more of a bait-and-switch. Carriers such as Zenith in California and Texas Mutual in Texas have proven track records of paying dividends for years [well over 10 in some instances].)

If you find Workers’ Compensation A Challenge, please call GDI Insurance at 888-991-2929 and Ask The Experts.

Matthew Davis MBA, AAI


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